President Joe Biden had laid out plans to replace the US government’s fleet of nearly 650,000 vehicles with electric vehicles. The move could bolt the electric vehicle sector, which has recently been running hot with companies like Tesla reaching record highs.
Status of the sector
Global sales of electric cars reached a high of 2.1 million in 2019, according to a report by International Energy Agency (IEA). And despite challenges posed by COVID-19 in 2020, EV manufacturers like Tesla broke records. Tesla’s stock soared by 740% in 2020, and many analysts predict Tesla shares will continue skyrocketing well into 2021. But while the media spotlight is on the California-based EV giant, many other manufacturers can stand to gain especially if Biden’s plan succeeds.
The president announced on January 26 that he plans to replace the US government fleet with “clean electric vehicles made right here in America, by American workers.”
Some of the top US electric vehicles manufacturers include General Motors (GM) and Nissan. An increase in demand for electric vehicles could also boost the stocks of companies associated in the production of EVs.
Notably, companies that make charging stations could see a spark as these would be crucial to supporting more EVs on the road. Plus, lithium stocks may be on your watchlist as the element is used to make electric car batteries.
Key companies in the electric vehicle sector
Here are some stocks you may want to research.
General Motors (GM) and Ford
Ford and GM stocks jumped after Biden announced his EV initiative. Both companies plan to roll out new electric vehicles in 2021. Ford and GM have had long-standing relationships with government fleet networks.
Tesla has a valuation of more than $700 billion. It recently crossed into the top five players of the S&P 500. And despite a less-than-stellar Q4 2020 report, analysts believe the EV maker will continue to make strides in 2021.
On Friday, Argus Research’s Bill Selesky cranked his Tesla price target to $1,010 per share or a 30% increase from $777. He added, “We further believe that the incoming Biden administration will offer rebates and new tax incentives to encourage consumers to buy EVs, which we think favors Tesla versus all the rest.”
The luxury EV maker is currently valued at about $4.52 billion, and analysts project its stock to double over the next year.
This New York company makes off-road vehicles targeted at consumers seeking ruggedly-built rides powered by clean energy. While the company has yet to roll its first Hummer-like truck off the lot, it’s currently letting people reserve their vehicles. It also got plenty of media hype this past year.
Workhorse shares spiked by 30.2% the day after Biden’s announcement. The company makes electric cars and aircraft for the transportation sector, as well as cloud-based telematics technology.
Blink Charging is a major manufacturer of charging stations for EVs. According to Biden’s climate plan, he intends to work with local government officials to deploy more than 500,000 new public charging outlets by the end of 2030.
This Chinese EV company also gained steam in 2020 and saw a 113% increase in car deliveries compared to the previous year. It sold more than 1 million vehicles in 2020 and that number can turn into 10 million by 2030, according to research organization BloombergNEF.
The well-known car maker from South Korea has spent the last few years expanding its fleet of EVs. Earlier this month, it announced plans to partner with Apple to start producing autonomous electric cars by 2024. Select a company to learn more about what they do and how their stock performs, including market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield. While this list includes a selection of the most well-known and popular stocks, it doesn't include every stock available.
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Why invest in the electric vehicle sector?
The electric vehicle sector has been driving on an upward road in recent years as it hit record sales, and companies like Tesla found themselves among the biggest in the world.
If Biden rolls out his plan to replace the US government fleet with electric vehicles, American manufacturers may see a surge in production and revenue. But foreign companies with proven track records in the EV game can remain competitive.
And while the EV fleet initiative remains uncertain, it’s clear that Biden is determined on pursuing a clean energy agenda. The electric-vehicle sector can benefit from this.
According to the climate plan detailed on his official website, Biden will push for “rigorous new fuel economy standards aimed at ensuring 100% of new sales for light- and medium-duty vehicles will be electrified.” This move could make EV manufacturers huge customers of the US government.
A Democrat-controlled Congress may work in his favor to make this a reality.
What unique risks does the electric vehicle sector face?
Even though the electric vehicle sector is surging right now, it’s no guarantee it will stay hot into the future. Here are some points to keep in mind:
- Market share: Despite recent optimism in the EV sector, electric vehicles accounted for 2.6% of global car sales and about 1% of global car stock in 2019. So it’s not clear when or if electric vehicles would dominate the roads.
- Building materials: Lithium-ion batteries power today’s electric vehicles. A spark in the EV sector would drive demand for this finite resource, which can be difficult to mine. And its environmental impact could put environmentally conscious customers at odds with manufacturers. Moreover, regulations on lithium emissions may indirectly have a negative impact on the electric vehicle sector.
- Government uncertainty: When President Biden announced his plans to replace the government fleet with electric vehicles on January 26, he was unclear about the specifics, including a timeline for the project, the manufacturers who would be part of the plan and the means by which to fund this massive initiative. Moreover, he didn’t leave tax increases off the table.
- Company hype: Electric cars can sound like all the rage today, but there are still some EV companies that are nowhere near the finish line when it comes to production and quality. Semi truck manufacturer Nikola was even accused of fraud over its technology claims, and stocks plunged in late 2020 after seeing a steady rise.
Bidens plan to put more EVs on the road could send a shockwave through the electric vehicle sector. Some electric vehicle stocks are already surging. But before you can invest, you’ll need to open a brokerage account. Compare your stock-trading platforms to find one that’s right for you.
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